The transition to a competitive market structure raises significant concerns regarding reliability of the power grid. A need to build tools for security assessment that produce operating limit boundaries for both static and dynamic contingencies is recognized. Besides, an increase in overall uncertainty in operating conditions makes corrective actions at times ineffective leaving the system vulnerable to instability. The tools that are in place for stability enhancement are mostly corrective and suffer from lack of robustness to operating condition changes. They often pose serious coordination challenges. With deregulation, there have also been ownership and responsibility issues associated with stability controls. However, the changing utility business model and the developments in enabling technologies such as two-way communication, metering, and control open up several new possibilities for power system security enhancement. This research proposes preventive modulation of selected loads through direct control for power system security enhancement. Two main contributions of this research are the following: development of an analysis framework and two conceptually different analysis approaches for load modulation to enhance oscillatory stability, and the development and study of algorithms for real-time modulation of thermostatic loads.;The underlying analysis framework is based on the Structured Singular Value (SSV or mu) theory. Based on the above framework, two fundamentally different approaches towards analysis of the amount of load modulation for desired stability performance have been developed. Both the approaches have been tested on two different test systems: CIGRE Nordic test system and an equivalent of the Western Electric Coordinating Council test system.;This research also develops algorithms for real-time modulation of thermostatic loads that use the results of the analysis. In line with some recent load management programs executed by utilities, two different algorithms based on dynamic programming are proposed for air-conditioner loads, while a decision-tree based algorithm is proposed for water-heater loads. An optimization framework has been developed employing the above algorithms. Monte Carlo simulations have been performed using this framework with the objective of studying the impact of different parameters and constraints on the effectiveness as well as the effect of control.;The conclusions drawn from this research strongly advocate direct load control for stability enhancement from the perspectives of robustness and coordination, as well as economic viability and the developments towards availability of the institutional framework for load participation in providing system reliability services.